New York State Can Set a Negative Precedent for US Energy Independence

The 1970s brought a litany of changes. The 60s free spirit was dying and we had beaten the Russians to the moon. But man did we piss off the OPEC nations. One had to wait in lines on alternating days based on your license plate number to get gas for your car. Imagine that? Americans had to suffer a little bit. The greater masses don’t have to war with other nations/cultures/tribes, rather we send a small sample of our citizens (and the best technology) to spread or take. All of this leads me to a point about energy. We sell our own and force buy from others.

We don’t produce that much, but Americans consume…lots. As a matter of fact, in 2009 the US consumed 308 million British thermal units (Btu) per person.  In 2008 we consumed 327 and 337 million Btu in 2007. For historical US consumption click here. Compared with that of other nations’ use, our use is preposterous. So, why don’t we use more of our own? Even with $4 plus gasoline, we were still driving. There is a push for alternative energy, like solar and wind and geothermal, but aside from the cost inefficiency and the minimal production given the core need, lots of people say, “that’s great, but not in my backyard – you are spoiling my view.” Again, why would Americans suffer?

Natural gas is, according to Princeton University, a fossil fuel in the gaseous state; used for cooking and heating homes. It is primarily methane with 0% - 20% other hydrocarbons. More to the point, it is found almost everywhere! Don’t tell anyone, it is even in the US! Oklahoma, Texas, New Mexico and Wyoming have large deposits. Arkansas and Louisiana, along with Texas are home to the Haynesville Shale deposit which is the largest found natural gas deposit in the contiguous 48 states. Major companies like Chesapeake Energy Corporation (NYSE:CHK) and junior companies like Cubic Energy Inc. (NYSE:QBC) have operations in this area. However, it is also in almost every state…including New York.

Why is New York a big deal? Because New York could be first state to ban controversial drilling practices. The state assembly passed a hydraulic fracturing moratorium, limiting the mining of natural gas. It is now in the hands of Governor David Patterson. I would take the term controversial and bring this to scrutiny. Natural gas is often found in shale rock about 10,000 feet below the surface. To get it out, either water (inert liquid) or nitrogen (inert gas) or compressed atmospheric air (inert gas) is pumped into the rock, fracturing it. The fractures are held open by sand (inert solid) or in the interesting case of Stealth Ventures (TSX-V:SLV) an inert plastic bead. Gas then flows out of the rock flows into a pipeline (once the well is tied in). Ownership of the gas depends on what the contract says and is usually between the producer and the pipeline.

There is nothing controversial about the hydraulic fracking technique being proposed in New York. It is a case of ‘not in my backyard’ syndrome. The US is the largest consumer of energy in the world. We are the largest consumer of natural gas. We have to import most of it. We are in a recession. Natural gas is a fossil fuel that requires only slight modification of combustion engines to accept it. It is already used for heating and cooking throughout the country. It is everywhere. Why wouldn’t we use existing technology to produce something domestically for use domestically? And it’s really cheap. Where is the logic? If New York passes this bill into law, they could be setting the precedent to not mine natural gas at all.